4 Money Lessons We Can Learn From J.K. Rowling

While divorced and living on government assistance in a tiny apartment with her infant child, J.K. Rowling wrote the first book in the world-famous Harry Potter series. The rest is history: Rowling became the first female billionaire novelist creating a brand worth an estimated $15 billion.

Even though she released the last Harry Potter book back in 2007, she still makes a cool $14 million per year through her proprietary website Pottermore and her other books. When it comes to becoming successful, she is living proof that perseverance and hard work can be just as effective as any spell from the Elder Wand. Here are the four money lessons we could all learn from author J.K. Rowling.

1. Be Prepared for the Worst

Rowling is so talented that her first three Harry Potter books occupied the top spots on numerous best-seller lists in the U.S. and the U.K. With each new book in the series, she went on to set new records in sales. When she published the seventh and final book the Harry Potter series, she set the record for the fastest selling book in the U.K. and U.S. and sales, accumulating more than 375 million book sales around the globe.

However, Rowling hasn't taken any of her success for granted. "Talent and intelligence never yet inoculated anyone against the caprice of the fates," she warned the Harvard Class of 2008 when she received her honorary degree at that institution. By citing her short-lived marriage, jobless situation, single-parent status, and dependency on welfare, she stated that some failure in life is inevitable and impossible to avoid. The trick is to have the humility to plan ahead and set yourself up to be able to survive the vicissitudes of life.

Money Lesson: Nobody is invincible, life happens. Sometimes your carburetor goes bust or your kid decides to test the water resistance of your laptop. Don't become part of the 67% to 75% of U.S. households that can't cover a $1,000 emergency expense; build an emergency fund that can help during a cash crunch. Also, if you're the sole or main breadwinner of your household, invest in life insurance to prevent a financial crisis for your dependents in case you're no longer in the picture. Realize that today is the cheapest that your life insurance will ever be.

2. Pay With Cash More Often

Being completely skint left a heavy mark on Rowling. In an 2015 interview she confessed, "I hate not having cash on me, and that's definitely a connection to having been on benefits and, you know, just watching my cash dwindle through the week and praying it will last."

The empirical evidence suggests that Rowling is doing the smart thing by sticking to cold hard cash as often as possible to make her purchases:

Credit card users spend 12% to 18% more than those using cash;

Diners at McDonald's using plastic spend an average of $7 while those using cash spend an average $4.50;

States with highway tolls realize that they can get away with charging more to credit card users than cash users; and

Credit card users were willing to pay more than twice as much on average as cash users for basketball tickets in a study.

Money Lesson: While a credit card can help you build your credit score, cash can help you to stick to your budget and hold you back from spending more than you have to. Start paying with cash more often. (See also: Top 6 Reasons Why Using Cash-Only Rocks)

3. Seek Professional Advice

In a world of memorable characters, Hogwarts Headmaster Albus Dumbledore is sure to stand out. Whether it's due to being the founder of the Order of the Phoenix or having a fondness for sherbet lemon and knitting patterns, Dumbledore just can't be ignored. In Harry Potter and the Sorcerer's Stone, he explains to Harry, "Humans do have a knack for choosing precisely the things that are worst for them."

From the many bad choices that Fred and George make throughout the entire series, you can clearly see that both muggles and wizards have a tendency to make poor decisions, particularly when it comes to making money. Remember the bet with Ludo Bagman? Throughout the Potter series, Rowling clearly suggests the importance of seeking out others for advice and help. (See also: 21 Personal Finance Lessons From Harry Potter)

Money Lesson: From executing an estate to pulling out a tree from your backyard, there are many times you should splurge and hire a pro. Hiring a professional doesn't just help you minimize the potential to cause physical or financial damage, but also prevents you from making bad decisions due to a lack of information. When it comes to finances, you'll often find it's a good idea to seek out the help of a financial adviser as your unique financial situation becomes more complex due to many instances, including a large inheritance, closeness to retirement age, or setup of a trust with relatives. (See also: Who to Hire: A Financial Planner or a Financial Adviser?)

4. Save for Retirement

In the same 2015 interview, Rowling shared the following anecdote:

"I met a man a couple of years ago who had grown up with a huge amount of money. And he said to me in passing, 'You know, money is not the most important thing.' Which is both true, and profoundly ignorant. Because when you have no money, it is absolutely the most important thing. Only someone who has never had to worry can make a statement like that."

This is a strong call as to why you need to start saving for retirement or strengthen your nest egg even more. In 2016, 26% of U.S. workers have less than $1,000 saved for retirement. This trend is particularly troubling among Millennials: 40% of Millennials say they don't have a retirement income strategy in place and 57% of them report they haven't even begun saving yet. As Rowling indicates, money isn't everything — but it'll surely become the most important thing when you don't have enough during your retirement years.

Money Lesson: In 2016 and 2017, you can contribute each year up to $18,000 ($24,000 if age 50 and over) to your 401K and up to $5,500 ($6,500 if age 50 and over) to your IRA. Make your very best effort to take advantage of those high limits by increasing your monthly contributions, taking advantage of windfalls, and maximizing employer matches. Remember that contributing to retirement accounts effectively reduces your tax liability every year and defers applicable income taxes until retirement when you're more likely to be in a lower tax bracket. It's never too late to start saving for retirement, and it ain't over till it's over! (See also: 7 Retirement Planning Steps Late Starters Must Make)

Disclaimer: The links and mentions on this site may be affiliate links. But they do not affect the actual opinions and recommendations of the authors.

Wise Bread is a participant in the Amazon Services LLC Associates Program, an affiliate advertising program designed to provide a means for sites to earn advertising fees by advertising and linking to amazon.com.